Top tips for startups seeking investment

Anx Patel is the CEO and founder of GoKart, an app that enables London restaurants to order ingredients from high-quality suppliers easily, quickly and for less money. On average, restaurants achieve savings of 20% when ordering supplies through the GoKart app, allowing independents and growing chains to enjoy the same discounts offered to larger chains. Here Anx offers his top tips of what startups should do when looking to secure investment.

The entrepreneurial bug is biting more and more people across the UK. The result is that a growing number of individuals are taking the brave, life-changing step to change career path by starting their own business.

For context, more than 3.5 million new companies were formed in the UK between 2012 and 2017. And it’s hard not to be inspired by the innovative startups emerging from this hive of activity.

In 2013, I myself took the decision to start my own technology business: GoKart, an app that enables independent restaurants in London to save money and time when ordering ingredients. The five years since taking this leap into the relative unknown have been filled with highs and lows, but thankfully the positives have greatly outweighed the negatives.

Today the business is recording roughly 30% month-on-month growth. But critical to achieving this has been the external support GoKart has received along the way – most notably, the backing of some fantastic investors.

UK startups are lucky to benefit from a vast community of private investors keen and willing to back exciting early-stage companies. In fact, according to data from research firm Beauhurst, a record amount (£8.27 billion) was invested in UK startups last year.

But just because there is evidently investment available doesn’t mean the process of securing it is easy. So here are three key pieces of advice I’ve learnt or picked up along the way for any entrepreneur looking to raise finance for their growing business.

1. Educate yourself of the options

From debt to equity, crowdfunding to VCs, business leaders must ensure they are aware of all the options available to them when looking to raise money.

Each brings its own pros and cons. For example, debt investment – which comes in the form of loans that are repaid with interest over time – is simply not suitable for young businesses without established, healthy turnover that enables them to pay the money back.

Crowdfunding meanwhile, which typically involves smaller investments from a wide range of investors, can provide a strong platform for a startup to raise awareness of its brand. By handing equity over to a large number of people, it can also help develop a loyal base of advocates or customers who want to see the company succeed.

To date, GoKart has gone down a different avenue though. Since launching, the business has raised more than £500,000 in equity investment but from numerous establishments and high-net-worth individuals – for us, as important as the money has been, it’s proven equally valuable to receive the insight, guidance and mentorship our investors provide.

In November 2016, GoKart entered Just Eat’s inaugural foodtech accelerator programme, which included early investment into the business and means we still benefit from input from senior personnel at Just Eat. Further to this, GoKart has also received backing a Lord from the House of Lords; chairs from Barclays and Morgan Stanley; the founder and CEO of London restaurant chain Tossed; and the founder and former CEO of the UK’s largest food procurement company PSL.

Each of these investors offers fantastic support and networking opportunities that enables our business to grow. Indeed, in the case of PSL’s former CEO Ivan Shenkman – a heavyweight within the food industry – the invaluable role he now plays as GoKart’s chairman is undoubtedly helping to enhance the business far beyond the investment he made into our startup.

When deciding which investment option to pursue and the sources to approach, a business must assess which is both best suited to its current status, but also what else beyond an injection of capital the startup requires to help it grow.

2. Let your passion shine through

Coming up with a strategy of where to turn for investment is the first phase of the process. The second and more difficult step is to actually meet with prospective investors and convince them to put their hard-earned money into your business, particularly as hundreds of other startups compete for their investment.

To achieve this, an entrepreneur must let their passion shine through. After all, the majority of people who start their own venture do so because there is an issue they want to solve, a market they want to disrupt or group of people they want to help – often this is borne out of the founder’s first-hand experiences, which gives them both the drive and the knowledge to set about making a positive change.

This was certainly the case for GoKart; the business was launched to address key issues that I witnessed first-hand during a decade of working in the food and drink sector; namely, small independent restaurants simply cannot compete with the buying power of large chains, while the process of ordering ingredients is more often than not slow, outdated and offline, so GoKart set about dragging things into the 21st century. Moreover, by bringing lots of independent restaurants together to buy as a group from selected suppliers on one platform, the app enables small eateries to benefit from economies of scale previously out of their reach.

It is a mission that the GoKart team and I feel very passionately about. And when speaking to investors, as important as the business plan is, this passion for what we’re doing is vital – it helps investors believe in the project and share our vision that this app is the way forward.

Entrepreneurs must have this passion and communicate it well; doing so will certainly improve their chances of winning over investors, who will invariably be considering multiple other options.

3. Don’t get greedy

The third and final piece of advice for anyone looking to raise money for their early stage business is this: only go after the amount you need.

With a steady stream of stories in the news about startups securing multi-million pound investments, it can be easy for entrepreneurs to feel as though they ought to be closing funding rounds worth at least seven figures. But in reality the vast majority of startups do not need or warrant such large sums.

Startups should focus on raising a precise amount and appeal to the right type of investor to achieve specific goals, whether that’s a well thought out marketing budget, new hires or R & D. Not only will this prevent the founders from giving away more equity than they need to or burdening the business with unnecessary debt, it will also keep operations lean.

And of course, as GoKart has done – and indeed is in the process of doing at present – an entrepreneur can always seek more investment in manageable chunks further down the line.

Even with a wealth of investors eager to back the UK’s small businesses, the process of securing investment is certainly not easy. But from my experience, following these three pieces of advice will improve a startup’s chance of success.